South Korean car maker to erect $1bn Mexico plant

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br kia EPA Mexico's President Enrique Pena Nieto announces in Mexico City on Wednesday that South Korean car maker Kia will invest $1 billion to build an assembly plant in Pesquer�a, in the north-eastern Mexican state of Nuevo Le�n, which will begin operations in 2016. Photo: EPA

Nacha Cattan and Brendan Case Mexico City

KIA MOTORS plans to build its first assembly plant in Mexico as the South Korean car maker follows European and Asian rivals in adding regional production.

Mexico’s President Enrique Peña Nieto said on Wednesday that the company would invest more than $1 billion (R10.6bn) in the factory and attract another $1.5bn from Kia suppliers in the country. The plant would produce 300 000 vehicles a year and be completed in the first half of 2016, Kia vice-chairman Lee Hyoung-Keun said.

Kia’s commitment expands on Mexico’s car making prowess. The nation’s output is poised to surpass 3 million vehicles this year for the first time, according to the Mexican Automobile Industry Association, buoyed by plant openings since November for Nissan, Honda and Mazda.

“Having a Korean company enter Mexico will mean that practically all global auto makers will be represented in the country,” Armando Soto, the president of Kaso & Asociados, a Mexican motor industry consultant, said. “It will also trigger large investments from Korean auto-parts companies.”

Peña Nieto did not spell out what models would be produced at the factory, which will be built in Pesquería, near Monterrey. That would make Seoul-based Kia the first car maker with an assembly facility in Nuevo León state, based on a tally compiled by the vehicle trade group.

br Mexico Assembly Plant KIA Vice-Chairman and CEO Hyoung-Keun Lee (left) and Mexico's President Enrique Pena Nieto talk during an announcement regarding a new KIA Auto assembly plant to be set up in Mexico. Photo: Eduardo Verdugo Associated Press

“Having

the option of investing in any country, a transnational company as prestigious as Kia Motors chose Mexico,” Peña Nieto said. “This shows the confidence global investors have in the present and future of Mexico.”

Kia is partly owned by Hyundai Motor Company, Kia’s larger affiliate. Economy Minister Ildefonso Guajardo said last year that Hyundai was among car makers considering building a Mexican plant.

In June, Daimler and Nissan said they would jointly produce Mercedes-Benz and Infiniticars at a new e1 billion (R14bn) plant in Mexico. BMW followed the Daimler-Nissan announcement by saying last month that it would spend $1bn on a new Mexican factory.

The Kia plant was likely to produce Forte compact cars and Rio subcompacts, which Kia made only in South Korea, said Ed Kim, an industry analyst for AutoPacific in the US.

“Those are vehicles that have lower profit margins and would be logical candidates for Mexican production. Potentially, the Soul would be as well,” said Kim, a former product planner for Hyundai.

“The Rio is also the type of small, lower-priced car that could be exported to Latin American markets.” – Bloomberg


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